How to Earn More and Work Less with Note Investing

Whether you know it or not, you are probably already involved in note investing but on the wrong side of it. Investing in notes is the process of buying debt in the form of credit cards, student loans, mortgages, or car loans. But instead of making payments, you collect payments from the borrower, which include a higher than average interest rate.

Many investors think that note investing sounds too good to be true, or may even think it is a scam. This could not be further from the truth. Note investing is simply the process of purchasing debts that borrowers owe. Once you purchase the debt, you earn interest each month until the debt is paid in full by the borrower. This interest can range anywhere from 3% on a mortgage note to well over 15% on a debt like a credit card. The interest rate is not subject to changing market conditions so you earn the same rate over the life of the loan, which can be anywhere from a few months to 30 years, depending on the terms of your investment.

While there are many types of note investing like credit cards or car loans, there are some specific advantages that come with investing in real estate notes. Investing in notes that are tied to the real estate market is very similar to trust deed investing. Basically, you purchase a mortgage debt from a bank. The bank benefits because there is less of a risk of loss in the case of default because it has capital from you. You benefit because you can now start earning the interest that is paid by the borrower each month. While this may be a relatively low rate, it is usually a high payment due to the amount of money involved in the transaction. You can earn hundreds every month compared to a credit card note which may have a higher interest rate but generally a lower balance so the monthly interest payment is less.

Higher monthly payments makes real estate note investing one popular way to start investingin notes is to invest in real estate notes. In this situation you basically buy a promissory note that is part of a mortgage. You hold the note and earn interest. You receive payments each month until the mortgage is paid in full and then you get back your initial investment. You don’t have to work for your payments, you sit back and let the cash flow in.

Risks and Benefits of Non-Performing Notes

Real estate note investing also has an extra opportunity for smart investors to earn high returns, non-performing notes. A non-performing note is exactly what it sounds like, a debt that is currently not being paid. When a mortgage is not being paid, the bank has two options, foreclose on the property or sell the note to an investor. While several years ago foreclosure was the first choice, many banks are now opting to sell non-performing notes.  By selling the note rather than going through the expensive and sometimes drawn out process of foreclosing, a bank stays out of the chain of title, doesn’t become liable for the property’s environmental conditions and doesn’t have to worry about ownership issues. The sale of non-performing notes is a cheaper alternative to foreclosure.

Once you own a non-performing note, you basically fix up the note the same way you would fix up a property. You can renegotiate the terms of the note with the borrower if you goal is long term monthly payments and interest earning. Or, if you would prefer to own the actual property that you hold the note on, you can foreclose on it and take possession. From here you can rent it out, fix and flip it, or hold onto it until it appraises for the amount you want to sell it for. Regardless of which avenue you take, you will make a profit on your non-performing note.

The greatest risk with non-performing notes is that you will lose money during foreclosure. You can help make this less likely by knowing all the laws related to foreclosure in the state where you own the note. Make sure to take into account any extra expenses the foreclosure process may entail.

Call us today to get started with note investing and non-performing notes!

At Level 4 Funding, we specialize in alternative investment strategies like investing in notes. We can help you through the process to help you start working less and earning more!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Be Successful and Make Money with Note Investing

Whether you know it or not, you are probably already involved in note investing but on the wrong side of it. Investing in notes is the process of buying debt in the form of credit cards, student loans, mortgages, or car loans. But instead of making payments, you collect payments from the borrower, which include a higher than average interest rate.

Many investors think that note investing sounds too good to be true, or may even think it is a scam. This could not be further from the truth. Note investing is simply the process of purchasing debts that borrowers owe. Once you purchase the debt, you earn interest each month until the debt is paid in full by the borrower. This interest can range anywhere from 3% on a mortgage note to well over 15% on a debt like a credit card. The interest rate is not subject to changing market conditions so you earn the same rate over the life of the loan, which can be anywhere from a few months to 30 years, depending on the terms of your investment.

While there are many types of note investing like credit cards or car loans, there are some specific advantages that come with investing in real estate notes. Investing in notes that are tied to the real estate market is very similar to trust deed investing. Basically, you purchase a mortgage debt from a bank. The bank benefits because there is less of a risk of loss in the case of default because it has capital from you. You benefit because you can now start earning the interest that is paid by the borrower each month. While this may be a relatively low rate, it is usually a high payment due to the amount of money involved in the transaction. Even at 3.5%, you can earn hundreds every month compared to a credit card note which may have a higher interest rate but generally a lower balance so the monthly interest payment is less.

Benefits of Real Estate Note Investing

As discussed above, high monthly payments are one key benefit of investing in notes that are related to real estate. In addition to high payments, there are several other benefits that are unique to real estate note investing.

1.       Borrowers are less likely to default completely on their home loan. While foreclosure does happen and is a risk, most borrower are emotionally tied to their home. Even if other debts end up being defaulted on, they are less likely to want to risk losing their home so a mortgage payment will often be a priority, even during times of financial stress.

2.       The note is backed by a real, tangible asset. In the event of default, the property can be foreclosed on and some of your investment can be recouped. This is simply not the case in many other types of note investing. Take credit cards for example, if a borrower defaults, his credit will be impacted but credit cards are unsecured debt, meaning that there are no physical assets that can be used to recoup your funds.

3.       Note investing can be very profitable. Especially if you buy a non-performing note and spend time to rehab it. This means you buy a note that is close to or in default and renegotiate the terms of the loan with the borrower to avoid foreclosure. You then earn interest and the note itself becomes more valuable. In some cases, these notes can be worth nearly 12% interest each month.

4.       Less competition. Investing in notes is a niche investment market. There are only a few private equity firms and hedge firms that use this investment strategy and the pool of individual investors is even smaller. This means no bidding wars and often puts you in a great position to negotiate price and terms.

5.       Easy, passive investing. You can have a financial company manage your note for you for a flat fee that is usually quite small. In addition, if the note is performing there is almost not managing necessary. You get to sit back and earn money every single month.

Call Level 4 Funding to learn more about investing in notes today!

Note investing is a great strategy to build your investment portfolio and has the potential to help you earn big bucks. Call us today to get started!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Trust Deed Investments: How to Make Your Money Work for You!

When it comes to investing, there are many, many options to choose from. While conventional options like stocks or bonds can be lucrative, trust deed investments are a lesser known type of investment that can yield high interest rates and low risk.

When you buy a property in Arizona and finance through a bank like Wells Fargo or Bank of America, most people think the bank holds the deed to the property. This is not the case. Usually someone’s grandma in Oklahoma or an investment banker in New York purchases a promissory note, funds your loan, and retains the legal title to the property. Sounds complicated, but really it is not, it is all part of trust deed investments.

The investor in trust deed investments purchases an interest in a mortgage through a promissory note. The investor can purchase the full mortgage or a part of it. If the investor purchases the full deed, he/she must have enough capital to fund the whole mortgage. If a fraction is purchased then the investor puts up a fraction or percentage of the value of the mortgage or promissory note. In this case the investor has the option to purchase a first or second deed of trust. A first deed of trust means that the investor is first in line to be paid back in the event of default while a second deed investor is more at risk for losing his money.

Once you have purchased trust deed investments, you officially hold an interest in the mortgage. You also hold the legal title to the property on behalf of the bank (the borrower retains possession of the physical property). Each time the borrower makes on time payments, you earn interest from the bank. The interest rates on trust deed investments are often higher than the interest rates on stocks and bonds. Once the loan is paid in full either by sale or after the mortgage term, you get your initial investment back. Basically, the bank pays you to hold onto a piece of paper for them.

But why? This is the main question that holds many people back from trust deed investing. Why would the bank pay you interest to hold a paper for them? The reason has to do with foreclosure procedures in the event of default. The bank cannot hold the title to a property so if there is no trustee, the borrower retains both the legal and physical tittle to the property. If the borrower defaults, this makes it very difficult to foreclose. If the legal title is held by a third party, a trustee, the trustee can foreclose on behalf of the bank, making the process much quicker for the lender.

What Happens to the Investor?

In the event of a foreclosure, the investor is at a greater risk for loss than if the borrower pays off the loan in full. However, trust deed investments are at least backed by actual real estate. Once the lender’s investment is repaid, the investor also gets their money back, assuming there is enough left from the foreclosure sale. This makes trust deed investing a bit safer than stocks because it is backed by something with real value.

Since the investment is backed by real estate, there are ways to make it safer. If you are considering trust deed investments, make sure that you are the first note holder. This will make you a higher priority when it comes to recouping your initial investment. Also, do your research. Make sure the deed you are investing in does not have any title issues or claims against it. Finally, make sure you know the market value of the property that the deed backs. Knowing the market value will help you decide if you are making a smart investment. Always assume that the property could go to foreclosure and you may need to be able to sell it quickly to earn back your money.

If trust deed investing sounds like a good fit for you, call a lender today!

Here at Level 4 Funding we specialize in deed of trust lending and other types of alternative investment and funding options. You won’t find trust deed investing by walking into your local bank so you need a private lender like Level 4 Funding. We know that trust deeds are not an investment that many people take advantage of and we know how much money you can make by doing so. We will be here every step of the way to answer your questions and help grow your money. 

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Trust Deed Investing: Good Lenders Are There When You Need Them!

Many homeowners think the only people involved in their mortgage are them and the bank. However, this is not usually the case as most loans also have a trustee who has engaged in the process of trust deed investing as a way to build an investment portfolio.

When a mortgage is approved, underwritten and recorded, many people imagine that there are only two parties working together, the bank and the borrower. However, this is not usually the case. In most mortgage transactions, there is a third party who works behind the scenes called the trustee. The trustee engages in something called trust deed investing by purchasing a promissory note from the lender. The trustee then holds the legal title to the property on behalf of the bank. The bank pays the trustee interest to hold the title on its behalf.

You may find yourself wondering, why would the bank do this? Why pay money to someone to hold onto a piece of paper for you? The bank engages in trust deed investing to help protect its assets in the event of default. If a borrower defaults on a mortgage, the bank has to take them to court to foreclose on the property and get its money back. This is a long, expensive process and there is always the possibility that they bank may lose. However, if the mortgage loan has a trustee who holds the title, the trustee can foreclose on the property on behalf of the bank. This can be done without a court hearing and is a much faster process. Once the foreclosure is complete, the lender will get its capital back and any remaining funds are paid to the trustee and finally the borrower.

Benefits of Trust Deed Investing

If trust deed investing sounds intriguing, there are a few ways to get started. The first and most important step is to find a private mortgage company or investment firm that loans on promissory notes. From here, you should be able to decide how much you want to invest. You can purchase an entire deed as a single investor. This is one of the safest ways to invest because you are the only investor that needs to be paid back in the event of default.

If investing in the full deed is out of your budget, there are still ways to get into trust deed investing. You can invest as a fractional investor and buy a portion of the deed. If this is your plan, finding the right broker is crucial. Depending on whether you are the first investor, your investment may be less safe. Your investment professional can work with you to explain how to purchase a first deed of trust vs. a second deed of trust. This is important because a first trust deed holder is the first investor paid back in the event of default. If you are a second deed holder, you are at a higher risk for losing some or all of your investment.

Your private lender should be able to fully explain all of the risks to you and help you make the right choice when it comes to trust deed investing.

If trust deed investing sounds like an investment option you want to explore, give us a call today!

Here at Level 4 Funding we specialize in alternative investment strategies like trust deed investments. Our financial professionals can help explain the process and answer any questions you may have. We will also make sure that you know all the risks and benefits so you can make an informed decision about how to invest your money. Call us today for sound financial advice and to get started trust deed investing. 

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027